Tyrell Co. entered into the following transactions involving short-term liabilit

Question

Tyrell Co. entered into the following transactions involving short-term liabilities in 2016 and 2017 2016 Apr. 20 Purchased $38,000 of merchandise on credit from Locust, terms n/30. Tyrell uses the perpetual inventory system. May 19 Replaced the April 20 account payable to Locust with a 90-day, $35,000 note bearing 8% annual interest along with paying $3,000 in cash $66,000 Paid the amount due on the note to NBR Bank at the maturity date $30,000 July 8 Borrowed $66,000 cash from NBR Bank by signing a 120-day, 11% interest-bearing note with a face value of ?Paid the amount due on the note to Locust at the maturity date. Nov. 28 Borrowed $30,000 cash from Fargo Bank by signing a 60-day, 7% interest-bearing note with a face value of Dec. 31 Recorded an adjusting entry for accrued interest on the note to Fargo Bank. 2017 Paid the amount due on the note to Fargo Bank at the maturity date Problem 9-1A Part 4 4. Determine the interest expense to be recorded in 2017. (Do not round intermediate calculations and round your final answers to nearest whole dollar. Use 360 days a year.) Year end accrual required for: Fargo Banlk Principalx Rate x Time -Interest Interest to be recorded in 2017

Explanation / Answer

1) Maturity date locust NBR fargo date of the note 19-May 8-Jul 28-Nov term of note 90 120 60 maturity date 17-Aug 5-Nov 27-Jan 2) interest due at maturity principal * Rate * time = interest locust 35,000 * 8% * 90/360 = 700 NBR 66,000 * 11% * 120/360 = 2420 Fargo 30,000 * 7% * 60/360 = 350 3) Amount in adjusting entry 30,000*7%*33/360 193 principal * Rate * time = interest interest to be acccrued 30,000 * 7% * 33/360 = 193 4) interest expense to be recorded in 2017 198 principal * Rate * time = interest interest to recorded in 2018 30,000 * 7% * 27/360 = 158 Journal entries Date Accounting titles & Explanations Debit Credit 2016 20-Apr inventory 38,000 Accounts payable 38,000 19-May Accounts payable 38,000 cash 3,000 notes payable 35,000 8-Jul Cash 60,000 notes payable 60,000 17-Aug notes payable 35,000 interest expense 700 cash 35,700 5-Nov notes payable 66,000 interest expense 2,420 cash 68,420 28-Nov Cash 30,000 notes payable 30,000 31-Dec interest expense 193 interest payable 193 2017 27-Jan notes payable 30,000 interest payable 193 interest expense 158 cash 30,351 interest payable is 192.50 and interest expense is 157.5 due to rounding we are getting odd figure

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.